(December 15) – “For semiconductor capital-equipment companies — the businesses that sell the machines that make chips — the year 2000 has been a dream, with industry sales skyrocketing roughly 83%,” writes Evelyn Ellison Twitchell for Barron’s Online.

“But the stocks have been more of a nightmare, as shares of companies such as Novellus Systems and Lam Research have plunged 25% and 55% this year.

“The reason: Personal computer and wireless phone manufacturers have reported lower-than-expected revenues. That’s gotten investors worried about the outlook for the chips that power them and the tools used to manufacture those chips.

“Indeed, some people are concerned that the semiconductor-equipment purchase cycle may have peaked and that chip manufacturers such as Intel will soon curtail their plans to buy new capital equipment in 2001.

“But even as the bears circle — nine Wall Street firms have cut their ratings on the stocks in the past three months — some pros are finding value amid the rubble.

“They argue that although orders will probably slow in the next few months, chipmakers will reaccelerate their capital spending in the second half of next year. And at current prices, there may be more upside than downside to the group.

“‘We’re seeing a pause and perhaps a correction, but therein lies the opportunity to buy these companies at value prices,’ asserts Peter Higgins, manager of the Dreyfus Midcap Value fund, which had 1.75% of its assets in Lam as of October 31.

“Everyone agrees, however, that sales growth will slow next year.

“Semiconductor Equipment and Materials International, the trade group that represents equipment manufacturers, forecasts that industry sales will grow 22% in 2001. And independent research firm Gartner Dataquest estimates that sales of chip-making equipment will likely increase by 15% to 20% in 2001. Still others are looking for just 5% to 10% growth.